Better Buy: Eli Lilly and Company vs. Johnson & Johnson

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Two of the biggest pharmaceutical companies in the world compete against each other on multiple fronts. Eli Lilly and Company (NYSE: LLY) and Johnson & Johnson (NYSE: JNJ) battle for market share in diabetes, immunology, and other areas.

Which of these two drugmakers is more likely to win in another market -- the stock market? Johnson & Johnson has enjoyed a clear advantage in recent years. Investors really need to know, though, how well each company is positioned for the future. Here's how Lilly and J&J compare.

A female scientist looking through microscope and another scientists holding a dropper
A female scientist looking through microscope and another scientists holding a dropper

Image source: Getty Images.

The case for Eli Lilly

Eli Lilly struggled over the last several years to generate revenue growth. However, CEO Dave Ricks stated at a major healthcare conference earlier this year that the company is on track to hit its goal of 5% average annual revenue growth through 2020. Lilly exceeded that target in 2017, with year-over-year sales jumping 8%.

There are three big reasons behind Lilly's resurgence. Diabetes drug Trulicity has proven to be a huge winner for the company, with 2017 sales of over $2 billion. That's more than double the drug's sales in the previous year. Lilly's osteoporosis drug Forteo is another blockbuster success story. And the newest rising star in the company's lineup, psoriasis and psoriatic arthritis drug Taltz, appears to be well on its way to reaching the $1 billion sale mark.

Lilly also claims several other products that are contributing to its growth. Cancer drug Cyramza and diabetes drug Trajenta saw double-digit percentage sales increases last year. Sales for another diabetes drug, Jardiance, jumped 122% in 2017.

More promising new products could be on the way, especially in treating pain. Lilly hopes to win FDA approval this year for migraine drug galcanezumab. Another migraine drug, lasmiditan, which Lilly picked up with its 2017 acquisition of Colucid Pharmaceuticals, is in late-stage clinical studies. Lilly and Pfizer are co-developing tanezumab, which is in late-stage studies targeting cancer pain, chronic lower back pain, and osteoarthritic pain.

Look for Lilly to fuel more growth through acquisitions of clinical-stage biotechs and assets as well as partnerships. The company could have more money to fund such deals in the not-too-distant future, with a decision on potentially selling or spinning off animal health unit Elanco expected within a few months.

Investors will get paid nicely while they wait for Lilly's newer products to generate additional growth. The company pays a dividend, which currently yields an attractive 2.85%.